Correlation Between Nasdaq 100 and 10 Year

Can any of the company-specific risk be diversified away by investing in both Nasdaq 100 and 10 Year at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Nasdaq 100 and 10 Year into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nasdaq 100 and 10 Year T Note Futures, you can compare the effects of market volatilities on Nasdaq 100 and 10 Year and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Nasdaq 100 with a short position of 10 Year. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq 100 and 10 Year.

Diversification Opportunities for Nasdaq 100 and 10 Year

-0.16

Correlation Coefficient

Nasdaq 100  10 Year

Good diversification

The 3 months correlation between Nasdaq and ZNUSD is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq 100 and 10 Year T Note Futures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 10 Year T and Nasdaq 100 is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Nasdaq 100 are associated (or correlated) with 10 Year. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 10 Year T has no effect on the direction of Nasdaq 100 i.e., Nasdaq 100 and 10 Year go up and down completely randomly.

Pair Corralation between Nasdaq 100 and 10 Year

Assuming the 90 days horizon Nasdaq 100 is expected to under-perform the 10 Year. In addition to that, Nasdaq 100 is 3.82 times more volatile than 10 Year T Note Futures. It trades about -0.01 of its total potential returns per unit of risk. 10 Year T Note Futures is currently generating about 0.0 per unit of volatility. If you would invest  11,111  in 10 Year T Note Futures on December 1, 2024 and sell it today you would earn a total of  3.00  from holding 10 Year T Note Futures or generate 0.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Nasdaq 100  vs.  10 Year T Note Futures

Nasdaq 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nasdaq 100 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Nasdaq 100 is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

10 Year T

Risk-Adjusted Performance

Very Weak

Over the last 90 days 10 Year T Note Futures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, 10 Year is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nasdaq 100 and 10 Year

The main advantage of trading using opposite Nasdaq 100 and 10 Year positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 100 position performs unexpectedly, 10 Year can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in 10 Year will offset losses from the drop in 10 Year's long position.

The idea behind Nasdaq 100 and 10 Year T Note Futures pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Fundamental Analysis module to view fundamental data based on most recent published financial statements.